A Tale of Two Cities: Easter News and Notes

A tale of two cities, screams to be profoundly appropriate in describing the current climate of the American markets. Those two cities of course would be Detroit and New York. Symbols representing two pillars of the American workforce and economic prosperity. Both the auto and financial industries have been decimated by losses, layoffs, and market indifference, producing for some, the biggest market fall since the crash associated with the Great Depression.

Detroit's auto stocks are still in tatters, and the news did not get much better. The US Treasury has provided General Motors (GM) with a specific set of instructions for the preparation of Bankruptcy on June 1. It looks less and less likely that GM will be able to avoid that scenario and Investors showed no confidence in any alternative as Monday's trade saw GM give back 16% to the $1.70s.

To counter that, New York was having a fantastic session as the optimism from the Wells Fargo Corp (WFC) pre-announcement of profitability sustained financial momentum. With important earnings announcements upcoming, Goldman Sachs (GS) and Citigroup (C) Investors are seeing a renewed confidence in not only profitability, but the ability of the government to do what it has set out to do. Rid the financial books of terrible assets.

Analysts estimate Goldman to earn about $1.30/share, but the street has begun its whisper-practice and with Goldman still seen as the strongest of the Wall Street brands the company is expected to beat its own number and handily. Citigroup, having alerted the market to profitable months in January and February is looking to continue, despite the accumulated average estimate of a $0.37/share loss (according to Yahoo finance). Goldman will likely set the tone for the banks, and if others in the sector can surpass their estimates it will go a long way to support this current market rally, and instill the type of institutional confidence that is needed to make the latest gains sustainable.

Also in the news over the weekend, besides a thrilling Masters golf finish, was reporting from the Wall Street Journal (Link) that Apple's (AAPL) iconic CEO Steve Jobs, is in fact still very much in the picture and involved in design and business decisions. Word is that Jobs was very much involved in the interface of the latest iPhone OS, version 3.0, and is also involved in the creation of the much-heralded Mac tablet/netbook device. The return of Steve Jobs, from a 6-month medical leave has been a cloud over Apple's stock despite sales growth and product innovation from the company. The recession may have curbed consumer spending habits severely, and Apple's premium brand did suffer, according to market research statistics, but with the company continually improving its Mac Computer and iPods lines recently and an upcoming iPhone announcement surely in June, Investors have begun to set aside worries about Jobs.

Should Jobs return on schedule and lead the next phase of iPhone evolution, expect resonant cheers and analyst upgrades on the anticipation of the next phase of Apple's product road-map. In fact Kaufman Bros. Shaw Wu conceded Apple's value in his latest report, bumping his price target to $150/share.

News reports of the rally's sustainability have been mixed, with some expecting negative trends to overshadow any glimmers of recovery. Thsoe glimmers however, are due to get brighter if the financial sector continues on this path of pre-announced profitability.

...And now starring Tim Cook as Steve Jobs plus a look at Apple's Quarter

In a memo that spread throughout the press like wildfire, Steve Jobs, CEO of Apple (AAPL) announced that he'd be stepping away from day to day duties to focus on his health issues. The iconic CEO cited further complications in this treatment to fix a protein irregularity along with the fact that persistent rumors about his health becoming a distraction to Apple's current management team.

The media back-and-forth had gotten so bad and become such a distraction that it forced Apple and Steve to release a letter to the "Apple Community" describing briefly about his personal health issues in an effort to reassure Investors that the company was not only in good have but had Jobs for the foreseeable future. That future got murky very quickly in after hours trading with Apple shares falling 5% on the news of Steve taking a 6 month leave of absence.

And the media back-and-forth continues, as several pundits are calling Apple out for not being open enough in disclosing the true nature and severity of the health issues Steve was facing. While Apple's corporate line of a "constantly evolving" situation with Jobs will hold under most scrutiny it will not come as a shock to anyone if the lawsuits start piling higher at the desks of Apple's counsel. As share prices have eroded in the last 12 months and with Apple sitting at $80/share the $190s seem like a distant memory, and while much of decline is attributable to general market and economic factors the haze of doubt over Steve Jobs, his health, and his ability to continue on as CEO, contributed a meaningful part of the sell-off.

The memo from Jobs concludes with the friendly "see you all this summer" send off yet many outlets are skeptical of his return at all. Apple it seems has been prepared for a transition for some time. Over the course of the last year, several Apple product events have had Steve share the stage with others in an effort to showcase the brilliant team Apple has surrounded Jobs with. This was most notable at this year's MacWorld conference in which Marketing guy Phil Schiller took the stage for the keynote speech. Taking the company reins during the 6 month term will be Tim Cook, who's very familiar with all aspects of the company due not only to his Operations experience but the fact that he took over as CEO when Jobs had surgery in 2004.

Apple's product standing among consumers is the highest it has ever been with 4 major lines of business becoming part of every day lexicon (iTunes, iPod, iPhone, Macs). And with analysts trimming estimates and cutting price targets left and right something seems to be amiss. Economic stresses have weighed heavily on Apple as its upscale products tend to carry higher price points as compared with other companies. But here's the kicker, analysts expect higher unit sales than last year for the company in virtually every business category yet expect Apple to earn significantly less per share.

The company guidance from last quarter was no real help as a range of just over $1 to the $1.30s was alarmingly low for the Street. While current consensus stands in the $1.40s-$1.50s that is still off the holiday season of 2007 in which Apple posted $1.76/share in earnings and $9.6Billion in Revenue with a higher than anticipated gross margin of over 34%.

For the current frame analysts expect Apple Revenue on average at $9.85Billion and a gross margin in the 31-32% range slightly above Apple's own forecasts.

Last Year sales:
-> 2.3Million Macs - $3.5Billion in Revenue
-> 22.1Million iPods - $4Billion in Revenue
-> 2.3Million iPhones - $240Million in Revenue (Rest Deferred)
-> Music Sales - $800Million in Revenue
-> Other Hardware - $380Million in Revenue
-> Software Sales - $630Million in Revenue

All of the above translated into $9.6Billion in Revenue for the quarter with gross margins of 34.7% and income of $1.58Billion for a net profit margin of 16.5%.

Estimate Ranges for this year from analysts include:
-> 2.5-2.8Million Macs, led by the refreshed line of MacBook models
-> 18-21Million iPods, likely with a higher average selling price due to the popularity of iPod Touch
-> 4-5.5Million iPhones, down quarter over quarter due to the previous quarter 3G launch and the in-store activation policy for which gift cards were issued instead of iPhones.
-> The growth in iTunes digital music sales continues to be strong and the AppStore has become another line of business for the company with over 500Million Applications for iPhone and iPod Touch already downloaded.
-> Other hardware and software sales will likely be lower but in similar ranges, with any declines to be made up by the growth in iTunes and the AppStore.

So some quick accounting for Christmas 2008 for Apple:
-> The Mac business with 2.6Million units (0% quarter over quarter growth) at a similar $1500 average selling price translates into $3.9Billion in Revenue
-> The iPod business with 19.5M units at a higher average selling price near $190 translates into $3.7Billion in Revenue
-> The iPhone business selling 5Million this quarter and with 18Million units deferred at an average selling price of $400 becomes $900Million in revenue
-> The iTunes store, AppStore along with AppleTV etc becomes close to $1Billion in Revenue
-> Other hardware and software could fall to $800Million

Total Revenue estimates for Apple on this end come out to $10.3Billion and with a 2% gross margin drop the income calculation would be close to $1.6Billion in profits and per share earnings in the mid $1.70s. Year over year flat profit growth given Apple's product momentum paints a somewhat conservative picture to some, however given the current economic environment it still bodes very well given current analyst expectations. With analysts citing slowing demand and a weak economy the numbers just don't seem to add up for a Christmas quarter with Apple earnings in the $1.40s, however even in very pessimistic scenarios a drop of $0.30/share in earnings from the above estimate still beats current expectations.

While all Apple faithful wish Steve a speedy recovery and all the best during his treatment, the company is indeed in good hands and can still outperform the competition in the months to come. With Tim Cook at the reigns now the company has seemingly played its transition team cards and can move Steve Jobs into more of an oversight role with Tim behind the day to day reigns upon his return. The fact that Apple has such a competent and capable management team has always been overshadowed by the charisma of Jobs but perhaps in his absence the continued quality of Apple products will shine through and others behind Jobs will get the credit they rightfully deserve.

Update: January 16, 2009 Apple announced 500Million Application have been downloaded from the AppStore.

Disclosure: Author owns AAPL

Microsoft's Search Strategy: Mo' Money Less Problems

With the Consumer Electronics Show having more of the media's attention than in recent years it was an opportune time for Microsoft (MSFT) to make the kind of splash during their annual speech the company needs. Granted part of the reason of the shifted media was Apple's (AAPL) MacWorld keynote speech, valiantly presented by stand-in Phil Schiller, focused on Apple software updates and lacked the ominous flair that "El Jobso" exudes or the shiny new toys gadget-connoisseurs have come to expect.

While Apple CEO Steve Jobs took a backseat this January it presented Microsoft head Steve Ballmer with a chance to speak at CES and present Microsoft's vision for not only renewed hope on its Operating System and Mobile front, where it's losing share to Apple, but also in Search, where it heavily trails juggernaut Google (GOOG).

While Microsoft has long tried to make inroads into Search, the company's approach has been the Biggie Smalls to Google's Puffy: "Mo' Money Mo' Problems". Year after year of throwing Billions of dollars at the cause hasn't resulted in any significant traction for Microsoft and in fact latest metrics show continued search share erosion. October-November data from comScore puts Google growing from 63.1% to 63.5% while Microsoft remains in 3rd place behind Yahoo (YHOO) falling from 8.5% to 8.3%. With the December holiday season on deck and the increase in search queries to boot it only stands to reason that Google continued to heavily outpace its two rivals.

Someone at Microsoft has been thinking about the late Notorious B.I.G., and finally the company has decided to try to turn the popular song around in its favour. The new strategy involves outbidding Google at every turn in order to put Live Search in front of as many "default" consumers as possible. It's a well known industry practice that companies pay hardware makers to have their products and services installed on default machines. Computers from Dell, Sony and HP all come with software from a variety of vendors beyond the standard Windows operating system, and recently this system has extended beyond hardware into web services as Google is in a deal with Mozilla (the makers of Firefox) to be the default search engine for the popular web browser. Microsoft hopes that by having many more default eyes on Live they can retain a high proportion of those users and turn them into searchers and ad-clickers. In essence: Mo' Money Less Problems.

Microsoft announced a couple of these partnerships during their CES presentation. The first with Dell, to have Windows Live essentials software pre-installed on all computers, which includes various software components including a browser toolbar and default search. The second with Verizon, and this may end up being the bigger of the two, to make Live Search the default search engine on Verizon phones. Microsoft clearly gave Verizon much better terms than Google as both companies were reported to be in the running for this deal. The 5 year exclusive partnership will see Microsoft search be put front and center to customers of now America's largest wireless carrier by subscribers.

Google of course now has its own Andriod operating system for Mobile devices and will look to that for growth, it also is the default search engine on Apple's incredibly popular iPhone and has its own Mobile Search application in the App Store. With an increasing number of web users becoming acclimatized to "google-ing", it will be difficult to say with certainty how many default users Microsoft can expect to keep for these partnerships. And you can certainly expect Google to be front and center in providing users with ways to have Google Search be installed alongside Microsoft's default offering or to replace it altogether. Either way shareholders of Microsoft need some sort of spark from the company, and with Windows 7 getting good press thus far, the Xbox successes and now the possibility of gains in Mobile and Desktop search the company may be finally ready to turn the corner.

Disclosure: Author owns AAPL, GOOG

Apple says 2009 MacWorld to be its last, Keynote sans Steve Jobs

Spin the panic wheels and beat the panic drums, Apple (AAPL) is pulling out of MacWorld. For years the marquee event for most Apple faithful, 2009 will unfortunately be the company's last hurrah.  On top of that, stock holders should feel some momentum pain as Steve Jobs will not be giving the Keynote speech at the final circling of the wagons.

The reasons given by the company were clear. Apple's too big now and too global to succumb to the whims of trade shows. Granted the corporate speak was a little more amiable.  With iPhone sweeping the globe, the AppStore a certified hit and Mac's selling in record numbers in a multitude of demographic and geographic segments, the company is actually right on the money.

The rumor-mills and press brigades will be sad to see the company go from the spotlight of MacWorld, but if this year has been any indication Apple continues to innovate and send out their darling press invites for more intimate Q&A sessions to show off new products or services. There's nothing in today's announcements to suggest these will not continue either.

While this announcement will cause a bit of a sell-off, likely led by the lingering questions of Steve Jobs health, it is clear Apple is shifting the power structure, or more so the perception of the power-structure of the company. The last press events have seen Jobs take a much smaller role in presenting and explaining. Even though I feel Apple is a much stronger stock and company than say Microsoft, I do see Apple taking a similar approach in moving Jobs into a "Chief Apple something" role in the future so that the company can be eventually transitioned with someone else as CEO.

Yes Jobs is a huge part of Apple's uprising and a huge part of the vision of the company, however with its market position, its small (albeit growing push and need for the enterprise) and its multiple product platform (iPods, computers, phones, music distribution, application distribution etc.) and its massive cash horde the prudent thing to do would be to position this "flier-momentum" company into its next phase of growth on a more even plane.  And that's shifting away from shows, doing product releases and showcases on their own terms and moving along with other potential acquisitions.

All Apple faithful love Jobs for everything he has done for the company and I don't think this is directly related to his health at all, but rather a move to begin to transition the spotlight to others at Apple. The sheer shock from "change" is enough to send Apple lowered, but investors should stay confident for a stronger than expected 2009 and beyond for the stock and the company as a whole.

Disclosure: Author is long AAPL

Apple's holiday quarter shackled by Good problems, high iPod demand

When Steve Jobs came on Apple's (AAPL) conference call the last go-round it was designed to put analysts and investors at ease. That it did, his presence calmed questioning and glossed over a then shockingly broad and conservative forecast for the holidays: Earnings of between $1.05 and the $1.30s per share of Cupertino fruit.

Introducing the Non-GAAP method for earnings was equally brilliant and needed, as analysts couldn't shake their traditional valuation methods of the company. The curve ball thrown by the iPhone's subscription accounting led to steady devaluation of the company stock, which then was taken brutally by the whirlwind of economic turmoil alongside the market. Bullish Cross (Link) did some of the most notable work recreating Apple's earnings for FY2008 putting "actual" earnings at around $7.50 vs the $5.36 reported in the standard GAAP way. A difference of over $2/share in earnings and about $40/share in price at a P/E of 20.

However, this subscription method which undervalued the company tremendously during the early stages of the Bears, will help propel the company forward in the troublesome economics that exist today. Steve's worker zealots could completely take the holiday months off and still count 1/8th of a year and half of the incredible selling iPhone revenues and earnings. But Apple folk aren't taking any time off and the expanding retail chain will be busier than ever this Christmas. Unfortunately it appears some of the company estimators forgot 2 important facts when placing Christmas build orders.

1) Apple products are hotter than ever and
2) People buy iPods as gifts no matter what

According to some work by long time Apple researcher Shaw Wu, Apple's experiencing wide shortages on iPods of all shapes and sizes. While analyst work can fall into several quality categories, most notably the work done by Gene Munster is always carefully calculated, checking shipping lead times on several web sites just doesn't qualify as ground-breaking research. It does however provide a simple barometer for demand if the sites you're checking happen to be some of the biggest in America (Sites like Amazon.com, Best Buy and Wal-Mart). As an aside, Wu, has been a constant on the Apple analyst providing reports to clients almost constantly.

When these retailers are showing shortages of select colour/storage combinations and long shipping times of other models it does qualify as cause for concern. Did Apple ship pessimistically along the lines of its forecast? Did it simply underestimate strong demand for its ubiquitous music players?

I believe the answer lies somewhere in the middle. Apple is being incredibly prudent in its cost controls these days, and after revealing to the world its new line-up of MacBook and MacBook Pro laptops and their new all-aluminum design process the R&D costs are aplenty. Couple this with the on-going work on the next version of its operating system OS X Snow Leopard, which is expected in early-mid 2009, iPhone/iPod Touch continuous software updates and whatever surprises are in store for MacWorl 2009 in January and some cost prudence is almost a necessity.

The company may have overshot it though in assuming current economic conditions would make the $230-$400 iPod Touch a tough sell. The reality is that the "Funnest iPod Ever" is performing exceptionally well and there are several reasons for it. Apple's online store has plenty of stock and has the Touch as a top seller. The App Store however, is near the top of the list if not at its peak of reasons to get the Touch. The Software marketplace pushed heavily by the iPhone in all adverts is also on and available for all iPod Touch devices, making the device far more than an iPod. As for the other models, iPod Nanos and Shuffles continue to make a great stocking stuffer year after year.

Amazon.com's list of top selling MP3 players is dominated by Apple, currently holding the top 10 spots, and 15 of the top 16. Dominance like this is incredibly hard to achieve, and even harder to maintain, as Apple has now done for the last several years. So with that research in hand, Wu's estimates call for 21Million iPod units to be sold, a little short of last year's record of over 22Million, but nonetheless a very successful holiday given current economics. Given the premise of over 20Million iPods, driven primarily by iPod Nano and iPod Touch devices, the logical thing for analysts to do would be to project a very healthy stream of iPod related revenue and earnings in the quarter.

Analyst conclusions on iPhone sales also represent the type of growth the company saw in the early years of the iPod rise. Last year's 2Million+ unit number is expected to nearly triple through the combination of in-store activations and iPhone specific gift cards. Corresponding AppStore sales will also be ready to incline in step, thus its safe to say the phone division is on solid ground for 2009. If China ever gets works out, the addressable iPhone market could potentially growth by another 600Million users.

So, all that's left for Apple to do is to prove the new Mac portables are as popular as they've started out being and you've got a company that will spend another conference call giving each other "corporate-speak" high fives, trying to step around analyst typical questions on how Apple bucked all these devastating economic head-winds. Year ago earnings of $1.76/share seemed so far away during the conference call and its accompanying guidance. With these latest analyst reports there is plenty of room for the consensus estimate to move higher.

The Vegas Line stands at $1.46 and I expect it to move to the 1.50-1.60 range as Jolly Saint Nick nears.

Disclosure: Author is long AAPL

Apple Aims for the Fences with $199 3G iPhone at WWDC

Apple's (AAPL) Annual Worldwide Developer Conference is typical fanfare for just that, Developers, but this year, all eyes were focused on the iPhone, both device and software platform. Steve Jobs took the stage with typical Jobsian fanfare and proceeded to showcase the future of the mobile development platform. Eager gadget connoisseurs, Apple fanatics and casual observers have been known to be caught up in The Steve's Aura, and while the typical WWDC is geared toward the most technically proficient computer folk, the rabid waiting for a faster iPhone had to come to a head at some point.

That time was now, as Jobs showed off a sleeker 3G+GPS iPhone that will be available in 22 Countries come July, with an additional 48 Countries seeing the device later in the year. The remarkable thing was not the expected iPhone announcement, the remarkable thing was the price. $199 for the 8GB model with a 2 year contract. It's a price point the mass market was waiting for, and should spur incredible demand for the must-have product. Apple's goal of 10Million units sold by the end of the year, seems ever closer now, and as Apple's shares dip to the $180 mark, it moves the company from "attractive valuation" closer to "is it really this cheap?" levels.

Not only is the 3G, GPS equipped iPhone coming, it is bringing with it the Application Store and open Software Development Kit. Apple showed off several applications at today's event and plenty more can be expected as the days roll off the calendar. Reporters of all shapes and sizes, in publications both big and small, are clamouring over the new "open" iPhone and the possibilities that the SDK promises, hailing the device and the platform as the next wave in computing. While customer's of iPhones and iPod Touches will undoubtedly be happy with the new selection of applications for their devices, Apple also stands to gain plenty keeping a 30% cut of all sales from the App Store. With a few games shown off today priced at $9.99 it stands to reason, the App Store will give Apple another supplemental Revenue and Profit stream.

While 3G and GPS were the two things consumers were clamouring for in the iPhone update, business users wanted the device to be secure, sync with their offices and provide full enterprise support & functionality. With the newest iPhone software, slated to be released in early July, Apple's answered the most determined business user requests. Exchange support for e-mail, calendar and contacts, various other networking protocols, and remote locking down and wiping of devices. Apple had previously outlined these features in their Roadmap event, but with the software available in a month, the time for business is now.

A Stat from the keynote: 35% of Fortune 500 have been testing the iPhone's enterprise software and SDK. That's a substantial percentage of businesses who see use and value in what Apple's device provides, and if even a fraction of this percentage produces a company wide roll out, Apple will have the clout to really compete with RIM's Blackberry on the business front.

As the "iPhone killers" roll off the assembly lines of competitors, Steve showed once again today that Apple still carries that design swagger, and holds such sway over the media, that each move is written about, rewritten about and scrutinized over till the next such Apple special event. When was the last time a phone from Samsung, LG, Nokia or Motorola was mentioned in thousands of news stories?

With today's market, the high P/E consumer sector, especially technology gadgets, is one most traders are very cautious about and with Apple sporting a Forward P/E of about 30, there has to be incredible growth to justify the price tag. Lucky for Apple holders, that growth is there, and has been proven time and again, regardless of economy. In time, those patient with the market, and Apple, will surely be rewarded, as today's iPhone announcement becomes tomorrow's iPhone worldwide roll out and at $199 to start, that's going to be a deal too incredible to pass up.

Disclosure: Author is long AAPL

Apple Shares Slide as Conservative Guidance bests Record Results

The hype machine that is Apple (AAPL) has run into a series of Investor stumbling blocks of late. Not only is the degradation of the US economy foiling its plans for personal electronic revolution, the company has had to deal with an increased footprint, Greenpeace complaints, Product Leaks, and somewhat unrealistic expectations of itself and its results! And all the while, maintaining record revenues and profits. The Dec 07 quarter was no exception as Apple delivered earnings of $1.76/share.

Apple's own guidance, always thought to be conservative, for the Christmas quarter was seemingly aggresive in the $1.40/share range, while The Street pegged earnings in the $1.50s. Fast forward to right before earnings and The Street's consensus estimate had jumped to $1.62/share with whispers of Apple delivering close to $1.80. Consider that one year ago Apple delivered $1.14/share and their own guidance was already close to a 30% rate of growth year over year. Those ever ambitious analysts on The Street were expecting over 40% year over year growth.

So, broken down and battered by recession fears Apple delivered $1.76/share, representing a 54% year over year profit growth rate! Remarkable! With the sales breakdown producing even more records for the company. Revenues gained 35% year over year to $9.6Billion.

Over 2.3 Million Mac Computers sold
Over 22.1 Million iPods sold
Over 2.3 Million iPhones sold

And this just begins to scratch the surface of the company's historic and record setting quarter. Now analysts had their own ideas and Apple matched, or bested all of them except for the numbers of iPod units sold, however, iPod revenue grew much faster than unit sales did (17% vs 5%), meaning the product shift had begun towards more expensive and higher margin models. Analysts were expecting higher unit sales in the neighbourhood of 23-25Million for Apple's very successful music player business.

Good old trusty Apple CFO Peter Oppenheimer gave the traditional spiel of "We give guidance we have reasonable confidence in achieving" just like every other quarter but analysts were taken aback at how soft the next quarter may be for Apple. Is the economic slowdown in the US going to effect this high profile firm this dramatically? Apple's guidance of $0.94/share looks soft on the outside, considering it reported $0.87/share a year ago at that time. How quickly analysts forget that Apple's guidance a year ago was around the $0.60/share mark. But, for Traders $0.87/share represents only an 8% year over year increase in profit! And this sent the stock spiraling after hours. Apple, which had found itself at record levels above $200, just weeks ago, has seen shares fall to the mid $155 range at closing, and further down to below $140 after the results came in.

The stock took an 11% hit to $138 after results and guidance were announced. This is too much, even in a turbulent economic picture such as the one that's painted for the United States. Apple's trailing earnings with this result stand at $4.56 or a 30 P/E. For growth of 54% year over year, this is astonishingly cheap! But don't jump on the trigger just because of that. Even though the Price-Earnings Growth multiple looks very attractive, it doesn't paint the entire economic picture. If recession is as likely as The Street makes it out to be, Apple could very well fall to a PEG of 0.5, from its current 0.55. Meaning that if next quarter's growth continues near 50% (regardless of conservative guidance) Apple could trade at a P/E of 25 given current economic conditions. On earnings of $5/share that would value Apple at $125. This I would see as an absolute bottom for the stock of this successful company.

Looking at the big picture, iPhone growth is an area where Apple will continue to see acceleration in earnings, due to its carrier revenue deals, and these will become a major part of earnings in 2008 and 2009. As the installed base of iPhone users grow, the recurring revenue Apple generates will follow suit, in a major way. Monthly payments to Apple from each of its carrier partners will become the big earnings story for the stock, along with revamped and redesigned entries to its popular Notebook Computer line.

I summarized where I think the bottom could be, but what about the bullish side of Apple. Well, once Wall Street gets its head around the conservative guidance game once again, and CEO Steve Jobs brings the Press together for a couple product events (New Laptops, A Tablet, iPhone SDK, WWDC and more) the Apple story will be once again first and foremost on Technology Investor's radars and the company can regain a P/E ratio of 40 going into the end of 2008. The end result in this case, if the US economy finds its footing and can sharpen growth expectations going forward, is a company continuing its string of successes over the past few years. Earning close to $6/share in FY2008 and capping the year at over $230!

So with the Bull and Bear cases in hand, it is up to Investors and the US economy to decide where Apple will be taken for a ride next!

Disclosure: Author is long AAPL

Apple highlights week with MacWorld Conference

Apple's (AAPL) MacWorld conference kicks off this week and CEO Steve Jobs takes the stage Tuesday for his annual keynote presentation. Steve's talk is typically for the company, its biggest stage to announce new products. Possibly none bigger than last year's keynote announcement of the iPhone.

This year the Apple rumor sites are buzzing again as Apple's banners rouse further speculation. "There's something in the air" is this year's theme. Many fans believing the company will update their very successful laptop line of computers. Apple faithful, stockholders, and fanatics alike will be glued to the various sources covering Tuesday's keynote. Historically Apple's stock has seen a bump as speculation builds towards new products and announcements but with the current market sentiment being so negative its hard to say whether fear will continue to keep Technology down, or whether an exciting new product will show Apple stock as a coiled spring ready to bounce higher.

For coverage of the keynote presentation major technology blogs like Engadget and Apple sites (AppleInsider, MacRumors) will be providing minute by minute updates.

One things for certain, Traders will have made their bets well before Steve Jobs takes the stage.

Disclosure: Author is long AAPL

Apple unveils Exciting but Expected iPod revamp, Stock suffers

The consumer electronics world held its collective breath today as Steve Jobs took the stage to show off Apple's (AAPL) new line of iPods for the holiday season. It's been almost 2 years since a total redesign of the flagship iPod, so most were expecting dramatic changes.

However, Jobs and Apple already changed the world this year! It was called the iPhone. A revolutionary device that ushered in a new era of interfacing, technology, entertainment and mobile communications. To think the company could pull another wonder out of its hat so soon was a stretch. But try they did and the results were astounding, but due to iPhone fever over the past 8 months, expected.

The focus on video and portable video is very apparent in the new line of iPods as the popular iPod Nano has become shorter, wider and sports a 2 inch screen capable of playing videos. The existing iPod received an interface refresh, was branded as iPod Classic and got a bump from 30GB & 80GB to 80GB & 160GB varieties. Perfect for that consumer going on vacation for a month with a load of music and video to hold on the go. The big announcement awaited the new flagship iPod and it came in the flavour of the now called iPod Touch, which incorporates many technologies seen first in the iPhone but without the mobile phone features.

The iPod Touch comes in 8GB & 16GB varieties and is built on the same Mac OS X platform that iPhone users are now familiar with. The most exciting part of iPod Touch is that it keeps the iPhone's wifi capabilities and packs the Safari Wed Browser. This allows iPod users the ability to connect to wifi networks and surf the Internet with their devices. Truly a remarkable thing, but in perspective analysts and investors have seen it before with the introduction of the iPhone 8 months prior.

Ringtones for the iPhone! Another eagerly anticipated feature that is now a reality. With the next version of iTunes, users will be able to use selected iTunes tracks and pay an additional $0.99 to chop up a 30 second portion into a ringtone for use with the iPhone. A great feature, all in all cheaper than other ringtones but nothing unexpected or truly groundbreaking here.

Now the news that's totally new. With the new iPod Touch comes the Wifi-based iTunes music store, which allows iPodders to buy music on the go through wireless networks. These tunes will sync up to their computers seamlessly when the iPod is reconnected to the computer at a future date. A deal with Starbucks was announced also, but seemed to confuse as to what "Free wifi" really means within Starbucks Coffee Houses. The assumption is that iPod & iPhone users (iTunes wifi is coming as an iPhone update soon) will be able to surf the iTunes music store for free, featuring specific Starbucks Music content, but would have to pay for other wireless surfing when sitting at a Starbucks.

Investors headed for the exits in excessive profit taking. Apple's fall from 52-week highs with the market led to a bottom in the 100s that begot a rise to $145 over the last weeks that was built on the hype that this event would bring more revolutionary products. Showcasing expected innovations did not appease the hype machine. Shares fell 5% to around 136 even as Apple announced a whopping 33% price cut for the 8GB iPhone (from $599 to $399). Perhaps investors saw this as a sign that demand was not as brisk as anticipated but I view it as Apple wanting to have a truly remarkable and record breaking Christmas shopping season as its lineup of media and communications devices fit neatly in market segments. With the iPhone price cut and the new iPod Touch model pricing of 8GB for $299 and 16GB for $399 the company has 2 flagship products that are sure to succeed over the holidays.

iPod sales broke 20Million units last holiday season and are expected to jump close to 25Million this holiday season. The injection of new iPods can only help the company reach these lofty expectations. The kicker still is the growth in video downloads as almost 100Million TV Shows have been downloaded to date. However only the flagship Video iPod had those capabilities while the most popular Nano models did not. This year that changes drastically and the full iPod line, with the expectation of the screen-less Shuffle, is now able to watch downloaded videos. Gonna be a rough season in that market for NBC if they can't make amends with Apple over iTunes contract negotiations.

While Apple still has some downside risk given the expected product announcements I believe its limited and only in the short term. The back to school computer season is reportedly very strong and the holidays appear to be ready to break records again as the company shifts its product line to video-centric Mac OS X based devices. The iPhone price cut is sure to spur sales and its only a matter of time until deals are crafted completely in Europe. Apple has so far this summer gone in line with general market trends and if fears resume from the credit crisis the stock will likely follow south. But for keen investors the opportunity is here again as Apple crafts new short term bottoms following this announcement. This opportunity is too good to pass up given company prospects going forward.

Disclosure: Author is long AAPL